Shri Ram Janmabhoomi Teerth Kshetra (SRJBTKshetra), a public trust, is building a grand temple dedicated to Lord Rama at his birthplace in Ayodhya of Uttar Pradesh. Recently, the consecration ceremony of Lord Rama’s idol at the temple was performed with great fervor. To facilitate the devotees visiting the temple, the Government of Uttar Pradesh and the Central Government are investing in developing civil infrastructure in and around the Ayodhya town. Reportedly, the Master Plan 2031 envisages the redevelopment of Ayodhya to be completed over 10 years with an investment of over Rs 85,000 crore.
This is expected to establish Ayodhya town prominently on the world tourist map. It is pertinent to note that just three years ago, Ayodhya was a small municipal town with a population of approximately 70000 with poor civil infrastructure. Impressed by the government’s investment in Ayodhya’s civil infrastructure, Global brokerage firm Jefferies commented in a report, “The grand opening of the Ram temple at Ayodhya by PM Modi on Jan 22nd, is a big religious event. It also comes with a large economic impact as India gets a new tourist spot which could attract over 50 million tourists per year. An Rs 85,000-crore makeover (new airport, revamped railway station, township, improved road connectivity, etc.) will likely drive a multiplier effect with new hotels & other economic activities. It can also set a template for infra-driven growth for tourism”.
Incidentally, it is not Ayodhya alone. This is, apparently, the template of development chosen by the government. In the past few years, the government’s emphasis has been on the development of infrastructure, especially logistic infrastructure, and encouraging private enterprises to build manufacturing capacities taking advantage of improved infrastructure and logistic facilities.
It is pertinent to note that the contribution of manufacturing to India’s economy peaked in the mid-1990s and has been on the decline since then. In the year 2022, manufacturing contributed 13.3% to India’s GDP, the lowest level since 1967.
Earlier some East Asian countries, and lately China, used this strategy to accelerate their economic growth with mixed outcomes. Though years of high growth ensured a decent quality of life for their citizens, none has been able to become a developed economy. The high growth phase could not be sustained even for two decades. The economies are now mostly growing below par. In recent years, Chinese economic growth has also been decelerating. The authorities have clearly shown a tendency to shift focus on domestic consumption to support the economy.
The Indian economy has mostly been dominated by services on the supply side and consumption on the demand side. Now there is a concerted effort to change the model to manufacturing and investment-led growth.
The questions that need to be examined in this context are:
· Given the fact that the Indian economy may probably be in its last decade of demographic dividend, is it desirable to cut spending on building social infrastructure, reduce the education and healthcare budget, and invest in long gestation infra projects?
· Agricultural sector contribution to India’s GDP has been stagnating around 16-17% for a long time. The proportion of the population directly dependent on this sector is close to 44%. Would it not be better to invest in developing agro-technology, infrastructure, and logistics than focusing on manufacturing (with much lower employment intensity now) to make growth sustainable, faster, and equitable?
· What is the probability that in one decade India can meaningfully increase its share in global manufactured trade? Curtailing domestic consumption to augment exports may be a high-risk strategy at this point in India’s economic growth journey. Of course, if it is successful, the rewards may be exciting. But the odds do not look great at this point.
· Self-reliance in defense production, full energy security, and net exporter status in manufactured electronics, are three key expected outcomes of the current policy direction. Healthcare, higher education, advanced technology, water, urban planning, etc. are some of the areas that are getting lower priority than required. Failure to achieve the outcomes could prove to be exponentially disastrous.
The point is that this midway diversion in the growth strategy could be fraught with significant risk. Our social, political, cultural, and economic structures are not the same as China’s. Adopting the Chinese strategy of economic growth and development may neither be desirable nor effective, in my view.
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